What are the benefits of registering a private company in Scotland?

What are the benefits of registering a private company in Scotland? The Companies Act 2006 brought most areas of limited company law in Scotland (and Northern Ireland) into line with England and Wales, however, some areas of the law are devolved to the Scottish parliament, and should be carefully noted by anyone starting a business in Scotland.

Differences in company law between Scotland and the rest of the UK: these differences are minor, for example, being related to the regulation of business names – whereby a private company should not be named in such a way as to suggest a connection with government – particularly the Scottish parliament. There are also differences in the way in which prosecutors may approach certain offences in company law, such as causing an audit report to be misleading; and differences to the auditing of companies within the public sector, and those that are charities in Scotland.

What's the best type of company to register? Although it’s traditional for one person to start up as a sole trader and for two people to register as a limited liability partnership, there are other options that can be more beneficial. For example, there are many advantages to starting up as a limited liability company or partnership.

What makes a limited liability company limited? Limited liability means that the company limited by shares itself exists as a legal entity in its own right. It doesn't matter how much debt it has accrued, even if it meets financial disaster, the directors of the company are protected from being personally liable. Even if the private company goes bust, the directors will not lose their personal assets. The limited nature of such a company is also very attractive to lenders, banks, and suppliers.

Why do lenders and banks prefer limited companies? It is easier for banks and other financial institutions to recover any money owed them, in the event of a financial disaster. This means that they are more interested in loaning money for capital and other developments.

Why do suppliers prefer limited companies? Suppliers are more likely to maintain supply lines when a limited company's cash flow is weak, because they know that they are better able to recoup their losses from a limited company. This happy circumstance also means that cash flow is more likely to improve sooner, because stock levels remain high.

How come limited companies are better at raising capital all round? Limited companies have more opportunities to raise capital. They don't just have to borrow money from financial institutions. They can also sell their own shares to boost capital. Coddan Formations Agency offers a number of services and packages to assist you with choosing the right type of private company registration for your business. Please call us on +44 (0) 207.935.5171 to find out how we can improve your chances of success in registering a private company in Scotland.